Apple uses cash wisely; Microsoft, not so much

“Apple’s stock has risen ten-fold over the last decade, a period during which Nasdaq lost 56%. At one level, this run is the natural outcome of a string of great product releases,” Sameer Bhatia reports for Dow Jones Investment Banker via The Wall Street Journal. “But it’s also a lesson in how consumer tech companies should allocate capital.”

“All companies must invest to stay relevant, but investments are too often made in the hope of keeping a technological edge on competitors or entering new business segments,” Bhatia reports. “Such considerations are always secondary for Apple; the primary consideration is always identifying and satisfying unmet customer needs. The distinction sounds fluffy and abstract, but the resulting difference in returns is concrete.”

Bhatia reports, “Consider, by way of example, that in the last decade Microsoft has bought 104 companies versus Apple’s 11. What’s more, over the same period, Apple has spent $8 billion, or one ninth of Microsoft, on R&D — and yet came out with three radical new products that now dominate their categories.”

Full article here.